Over 4200 Stocks Rise: A-Share Bull Market Momentum

Today's market, which initially fell and then rebounded, remained very active in trading. In just half a day, the transaction volume reached 1.25 trillion yuan, an increase of 130.8 billion yuan compared to the previous trading day, with more than 3,800 stocks rising.

The full-day transaction volume was fixed at 1.86 trillion yuan, with more than 4,200 stocks rising across the market.

We have said that the greatest confidence in this bull market of A-shares comes from the country's unprecedented clear policy attitude towards "boosting the stock market" and a series of extremely strong measures. The concept of technological innovation, which has both growth and certainty, will become the target of capital competition.

On October 18th, A-shares rebounded strongly, with the Shanghai Composite Index rising above the 3,300-point mark, the ChiNext board surged nearly 8%, and the STAR 100 rose by more than 8%, verifying our judgment.

This shows that A-shares have a certain resilience, and investors' enthusiasm has not waned. The confidence in this bull market is still very strong.

01

What are the characteristics of the market?

Let's take today as an example to look at the current market characteristics.

Today's strong sectors are education and steel.

Advertisement

The reasons all come from news stimulation.In the field of education, on October 25th, ZhiPu AI launched a new AI product—Autonomous Intelligent Agent AutoGLM. ZhiPu refers to it as a mobile operation assistant that can simulate user screen taps and a browser assistant for clicking on web pages. Similar to OpenAI's AI Agent, ZhiPu's AutoGLM model can replace humans in performing operations on electronic devices without the need for manual demonstration by users and is not limited to simple task scenarios or API calls. ZhiPu AutoGLM is compatible with eight well-known application software, including WeChat, Taobao, Meituan, and Xiaohongshu, covering commonly used online chatting, online shopping, social networking, maps, hotel train ticket booking, and other functions in daily life.

The reason for the surge in education stocks is that one of the partners, Dou Shen Education, announced over the weekend the establishment of a joint venture to develop AI educational products.

Additionally, the Beijing Changping District Market Supervision Bureau organized an exchange and training meeting for training institutions in the Huitian area. The purpose is to further regulate the business practices of training institutions in the Huitian area, maintain the market order of off-campus training institutions, and protect the legitimate rights and interests of consumers. Law enforcement officers introduced the establishment standards for off-campus training institutions in categories such as technology, sports, and cultural arts to the participating entities. They listed the admission processes and corresponding departments for various types of training institutions and urged existing training institutions to re-examine their admission in accordance with the establishment standards.

In terms of steel, the China Iron and Steel Association (CISA) will accelerate the research and promotion of capacity governance and joint restructuring. It has begun to expedite relevant research and conduct special investigations, proposing a package of policy recommendations to promote joint restructuring and improve the exit mechanism.

Similarly stimulated by news, there is the agricultural concept, which proposes seven key tasks, including promoting precision planting of major crops, digitalization of facility planting, smart livestock breeding, intelligent fishery production, intelligent breeding and seed production, digitalization of the entire agricultural industry chain, and digitalization of agricultural and rural management services.

Other relatively active sectors without news stimulation, such as mergers and acquisitions, real estate, and retail, have been previously hyped, but are simply being reheated today.

In summary, sector rotation and news stimulation remain distinct characteristics of the A-share market. Due to the abundance of hot money, funds tend to chase sectors that are stimulated by positive news.

In recent weeks, we have successively seen semiconductors, Hongmeng, followed by photovoltaics, new energy, and today we have seen education, steel, agriculture, and corporate restructuring.

Therefore, if one is pursuing short-term opportunities, it is necessary to pay more attention to news. If seeking medium to long-term opportunities, one should pay more attention to a significant announcement that is about to be released.Can there be an upward breakthrough?

The significant rebound on October 18th halted the index's continued downward trend.

In the past week, with minor fluctuations, the index has shown signs of short-term stabilization, but the momentum to continue advancing seems somewhat lacking. If the market wants to break through the "box," it needs a new impetus.

However, where exactly is this impetus?

Let's briefly review the reasons behind this major rebound. It started with the unexpected policy announcement on September 24th.

Since then, as everyone can see, the policy continuity has been very strong, with policy announcements being held continuously, and core departments such as monetary, fiscal, regulatory, and industrial sectors have genuinely introduced numerous stimulus policies. Compared to the past simple "shouting," this time it is undoubtedly more "sincere."

It can be said that this surge in the market was policy-induced.

From the information released by various parties, there is no dispute over the policy direction of stimulating the economy and ensuring the healthy development of the capital market. This aligns with the interests of all parties and is beyond doubt. As long as the economy does not emerge from the doldrums and the market does not head towards prosperity, investors can anticipate the continued introduction of stimulus policies.

However, it must also be acknowledged that, looking at the rise in the Shanghai Composite Index, it was at 2700 points a month ago and has now risen to around 3300 points, an increase of 20%, which to some extent has already priced in the policy benefits that have been released.

If the index wants to continue to rise, the driving force mainly lies in two aspects:First and foremost, it is essential to assess the effectiveness of policies. However, there is a lag between the announcement and the implementation of policies. For instance, real estate policies typically take 1-2 quarters to truly reflect in sales data, making subsequent data validation crucial.

The market itself has expectations. If the results exceed these expectations, the stock market can naturally continue to rise; if not, it will enter a correction phase.

In other words, we must wait to see the effects.

Secondly, there is the anticipation of any new stimulus policies that may be introduced, which is more tangible.

Currently, the market is most looking forward to the upcoming major conference, which will reveal the scale of fiscal spending, especially for large investment institutions and foreign capital.

They are well aware that as long as "money" is provided, it can address local government debt, allowing this investment entity to regain its investment capacity, or by providing fiscal subsidies to residents, enabling them to release their consumption capacity again, the economy can emerge from the doldrums. Once the economy improves, corporate earnings will improve, and coupled with the current liquidity easing, both performance and valuation will be positively impacted.

Additionally, the Finance Minister stated at a press conference two weeks ago that the central government has the debt capacity and ability, and the upcoming fiscal scale will also be relatively large.

If the final fiscal scale can exceed expectations, it will undoubtedly provide the market with the greatest upward momentum, and 3600 points, 3800 points, or even 4000 points are not just dreams.

Of course, it is also necessary to pay attention to risks, because if it merely meets expectations, the driving force will be limited. If it falls short of expectations, it will damage market confidence, and the index will most likely enter a correction phase again.How to Respond?

Currently, a popular view in the market, taking the Shanghai Composite Index as an example, suggests that there is a high probability of continued fluctuations between 3100 and 3400 points, with support at the bottom and resistance at the top, until new forces emerge to break this "box" pattern. If not, then thematic speculation will continue.

It is not necessary to rush to conclusions on whether this is the case; one can simply wait patiently for the upcoming major conference.

However, in terms of investment strategy, there is no need for complexity; one can simply prepare according to their own style.

Specifically, there are two main categories.

If one has a higher risk tolerance and can handle such market conditions, they can certainly consider participating in the current sector rotation, where capital is concentrated, and stock price increases are usually high, leading to considerable profits. But if one has a lower risk tolerance and emphasizes a conservative style, it is better to return to fundamentals and focus more on leading companies in various industries.

Alternatively, one could consider the way many people are currently participating in the market—index funds.

Recently, a new product has been added to the index fund family—the CSI A500 Index Fund. It tracks the CSI A500 Index, which selects 500 securities with larger market value and better liquidity from various industries as index samples to reflect the overall performance of the most representative listed companies in each industry.

When it comes to the CSI A500, people naturally think of the CSI 300. Their fundamental difference lies in the fact that the CSI 300 selects the top 300 companies by total market value in A-shares, while the CSI A500 is based on industry balance + market value dominance + interconnectivity + ESG, selecting 500 high-quality companies from multiple dimensions, representing a new upgrade for A-share broad-based indices.

Currently, several index funds tracking the CSI A500 are being listed and issued one after another. As one of the first batch of exchange-traded index funds tracking the CSI A500 Index, the Huaxia CSI A500 Index (Class A: 022430, Class C: 022431) is currently being issued.According to the offering announcement, the management fee rate for this fund is 0.15% per annum, and the custody fee rate is 0.05% per annum, both of which are the lowest fee structure currently in the market index funds.

Huaxia Fund has nearly 20 years of rich experience in index management, with a wide variety of index products and equity ETFs that have been ranked TOP1 in the domestic market for 19 consecutive years in terms of average scale. It leads the industry in product fees, index tracking, and index trading strategies.

Conclusion

Some investors believe that this round of market movement is merely a simple oversold rebound, not a long-term bottom reversal, due to the absence of a universal rise and the repeated fluctuations of the index.

However, when looking at a longer time frame, A-shares have been declining for several years, with corporate valuations and performance also falling, releasing a lot of risks in line with the economic fundamentals, especially in areas such as the real estate industry, the clearance of overcapacity, and the transition between old and new industries.

In other words, after the decline of the past few years, the main stock indices have fallen significantly compared to their historical highs, and even if they have not reached the bottom, the downward space is quite limited. As the saying goes, do not underestimate the confidence of this A-share bull market.

Investment is about cost-effectiveness, and there are many ways to make profits. One of them, as Charlie Munger said, is to put oneself in an environment where the downside is limited, and the upside is unlimited.

A-shares may continue to fluctuate for some time, and sector rotation may also accelerate. If you really can't keep up with the pace, there is no need to be anxious. Recall the famous saying by Warren Buffett:

By regularly investing in index funds, an amateur investor who knows nothing can often outperform most professional investors!